Hawk, Inc. has a 15% required rate of return. Three divisions of Hawk have proposed three projects to increase income over the next12 years. Three divisions report different measures as follows: Project A was reported to have an NPV of ($530) or negative $530.Projectwas reported with an internal rate of return of 18%. Project C was reported to have a payback period of 15 years. With whichof these projects should Hawk move forward?O All three sound great!O Project AO Project CO Project B

Capital budgeting is a process of deciding the best projects out of the number of projects available…

Answered: Hawk, Inc. has a 15% required rate of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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(4) Evaluate the ROI.
DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. MARR is 6%/year. Solve, a.What is the future worth of this investment?b. What is the decision rule for judging the attractiveness of investments based on future worth? c. Should DuraTech implement the proposed process improvement?
Terra Landscape is evaluating a capital budgeting project that is expected to generate $80, 100 per year during its eight-year life. If its required rate of return is 14 percent, what is the value of the project to Terra Landscape?
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. After careful study, Oakmont estimated the following costs and revenues for the new product: When the project concludes in four years the working capital will be released for investment elsewhere within the company. Required: Using Excel (this will save you time and effort) answer the following: Oakmont’s cost of capital is 15%, and management does not feel it should have any adjustment for risk, compute the NPV. Same situation as (a), but management does feel this project does possess a greater than average risk, so 19% should be the required rate of return. Compute the NPV. Management is concerned that Sales Revenues and Expenses could be rising due to inflationary factors. So the projection for year 1 is as shown, but that sales revenues will grow by 2% per year for years 2-4; and that variable expenses will grow by 4% per year for years 2-4, and that fixed out-of-pocket operating…
The following three investment opportunities are available. The returns for each investment for each year vary, but the first cost of each is $20,000. Based on a future worth analysis, which investment is preferred? MARR is 9%/year.
Four projects (A, B, C, D) are evaluated for five years in a company that adopts MARR=10%. The evaluation data are as follows: PW of A at MARR=10% is $50,000. FW of B at MARR=10% is $60,000. IRR of C is 12%. IRR of D is 9%. Based on the data above, which statement is correct? a. Cis better than D, but it is not better than A O b. A is better than B andD B is better than A, but we don't know if it is better than C d. All projects are feasible
A project produces annual net incomes of $300, $400, and $500 over the three years of its life, respectively. The initial cost of the project is $2000. The cost is depreciated straight-line for accounting purposes to a book value of $1000 over three years. What is the average accounting rate of return if the required discount rate is 5%? A 40.0% B 25.2% C 63.4% D 80.0% E 26.7%
Database Systems is considering expansion into a new product line. Assets to support expansion will cost $500,000. It is estimated that Database can generate $1,990,000 in annual sales, with an 7 percent profit margin. What would net income and return on assets (investment) be for the year?
Sanders Inc. has developed a new product line that they believe will revolutionize their industry and ensure they remain an industry leader. The projected sales are as follows: Year Unit Sales 1 97,500 2 112,000 3 120,000 4 135,000 5 103,000 The project will require $750,000 in net working capital to start and additional net working capital investments each year equal to 10 percent of the projected increase in sales for the following year. Total fixed assets are $4,100,000 per year. Variable costs will be $215, and units will sell for $335 each. The company will need to purchase equipment for $15,000,000 which will be depreciated as a seven-year MACRS property. In five years, the equipment can be sold for $3,500,000. The company is in the 21 percent tax bracket and has a 14 percent required return on their projects. The company will use land that was purchased for $1,800,000 three years ago. The land could be sold today for $2,400,000 and it…
Golden Co. is studying a project that would have a 10-year life and would require a $370,000 investment in equipment. The project would provide net operating income each year as follows for the life of the project: Sales $500,000 Less cash variable 200,000 300,000 Contribution margin Less fixed expenses: $130,000 34,000 164,000 Net operating income $136,000 The company's required rate of return is 11%. The payback period for this project is closest to: A. 2.7 years OB. 2.18 years 7.3 years OD. 5.2 years Show all expenses Fixed cash expenses Depreciation expenses
Please solve attached question normally, not using excel. thanks!
The management of California Corporation is considering the purchase of a new machine costing $400,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Operating Income Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The present value index (rounded to two decimal places) for this investment is a. 1.45 b. 1.14 c. 0.70 d. 0.88

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